Taiwan Inflation


Inflation accelerates in June

In June, consumer prices rose 0.61% over the previous month, well above the 0.18% increase recorded in May. The monthly reading reflected higher prices for housing and food, which more than offset lower prices for clothing and transport. As a result of the price increase in June, annual headline inflation stepped up from 1.7% in May to 1.9%, which overshot market expectations of a 1.7% rate and marked the fastest pace since February 2010. Meanwhile, the core inflation index, which excludes volatile categories such as fresh food and energy, increased 0.18% over the previous month. Nonetheless, annual core inflation remained virtually unchanged at May's 1.2%. Annual average headline inflation inched up from 1.0% in May to 1.1% in June after remaining steady for six consecutive months. The Central Bank raised the discount rate at its latest quarterly policy meeting held on 30 June, in a move widely expected by market analysts, as it has been doing every quarter since the tightening cycle began in June last year. The Bank lifted the policy rate by 12.5 basis points to 1.875%, claiming that the economy was performing better than expected amid strong exports and investment. In addition, the Bank also raised the rate on accommodations with collateral from 2.125% to 2.25% and its unsecured loan rate from 4.0% to 4.125%. The government expects inflation to average 2.1% in 2011.


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